By Harriet Torry

Munich Re, the world’s largest reinsurer, is to insure solar park operators against the risk of their suppliers going bust.

By assuming the risk of the panel makers’ insolvency, “major projects in particular have better access to financing,” said Munich Re board member Thomas Blunck.

Buying insurance in the anticipation the company you’re investing in might go bust doesn’t seem to bode well for the solar industry, but business credit insurance, or bad debt insurance, is relatively common in many industries.

Bankruptcy protection could become ever more relevant for the solar industry. Prices for solar panels, wafers, cells, and modules keep falling, and two German companies–Solar Millennium AG and Solon SE–recently declared insolvency.

German companies complain that Asian competitors have an unfair edge that’s distorting the market: massive government subsides, and markets their governments make it difficult for foreign companies to access.

All this at a time when Germany is trimming its subsidies aimed at encouraging solar power. The Federal Network Agency slashed feed-in tariffs–minimum price guarantees for electricity generated by renewables–by 15% as of January 1.

Close Brothers Seydler Research said last week, in a note to investors, that “additional cuts in PV promotion schemes in Germany and abroad might cause unpleasant surprises in 2012 and 2013.” The firm anticipates worsening financing conditions in combination with continuing fierce price competition.

The German solar industry is trying to fight back. The head of industry group Solarvalley Central Germany, made up of companies and organizations in the states of Thuringia, Saxony and Saxony-Anhalt, is calling for punitive custom duties for Chinese manufacturers, according to a recent article in the Osterländer Volkszeitung.

German solar company Solarworld AG is pursuing a suit with six other companies at the U.S. Department of Commerce and the International Trade Commission alleging Chinese manufacturers have been dumping solar panels on the U.S. market and received illegal subsidies from the Chinese government, which has injured manufacturers.

Amid the trade disputes and insolvency worries, many analysts are cautious on the solar industry’s prospects. LBBW Asset Management today published a report that said solar and wind energy are “without potential” and “there’s currently no money to be made with renewable energy.”

Insuring against manufacturer’s insolvency risk, however, might be the exception.

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